IPO gold rush or bubble? India’s co-working firms test the public markets

The wife-husband duo co-founded the Bengaluru-based versatile workspace supplier in 2015.

A month later, they took the IPO proposal to the board.

Two elements had been at play. First, enterprise capital and personal fairness funding had slowed over the previous few years, resulting in new-age firms turning to the public markets for funding. In 2024, 13 startups, together with Swiggy, Ola Electrical, FirstCry and Blackbuck, went public. Second, Awfis Area Options Ltd grew to become the primary versatile workspace firm to get listed in Might 2024.

So, a decade after it was based, IndiQube went public, turning into the third such agency within the sector, after Awfis and Smartworks Coworking Areas Ltd. Its ₹700-crore IPO was subscribed 13 occasions. Shares of Indiqube listed on 30 July this yr at ₹216 on the Bombay Inventory Trade (BSE), marginally down from the difficulty worth. In the meantime, rival Smartworks, additionally based in 2015, raised ₹582.6 crore. Its shares, when listed, traded barely above the difficulty worth on the BSE.

Because the business workplace market in India circled after the pandemic, it noticed sturdy demand pushing adoption for flex workspaces. These places of work are shared and corporations can hire for various length. In India, versatile workspaces are available in two kinds—co-working, the place a number of firms can share the workplace premises, and managed places of work, the place area is custom-made for particular person firms.

A cross-section of firms throughout sectors, together with global capability centres (GCCs), have pushed up leasing, and growth. Flex leasing jumped from 7.9 million sq. ft in 2022 to fifteen.8 million sq. ft in 2024, as per property advisory CBRE India. The share of flex area leasing in general workplace leasing grew from 14% to twenty% throughout this era.

Avendus Capital, an funding financial institution, forecast that the sector will develop to handle a $9 billion market by 2028.

With the three IPOs, and two extra on the horizon—The Government Centre India and WeWork India – India’s pretty younger flex workspace business has demonstrated what globally no different nation has but. A number of flex workplace sector IPOs from a single nation is uncommon.

First-mover benefit

The IPO journey of India’s flex workspace operators began a yr again, with the general public itemizing of Awfis. In some ways, it set the tone for the business.

Amit Ramani, founding father of Awfis, confronted one persevering query from buyers: If world firms had failed, how would you do it?

That appeared a legitimate query.

There was no precedent in India. Probably the most celebrated title within the sector, globally, is WeWork Inc. Its deliberate IPO, at a $47 billion valuation in 2019, was a catastrophe—the corporate shelved it after questions had been raised on governance and profitability. Nevertheless, in October 2021, the corporate made its public market debut, by means of a particular goal acquisition firm deal.

However Ramani proved his critics fallacious. Awfis’ shares are up 50% for the reason that time it listed in Might 2024. The BSE SmallCap index, in distinction, rose solely 10% in the identical interval.

Analysts then mentioned that the overwhelmingly constructive response to the IPO challenge (subscribed 108 occasions) was attributable to its first mover benefit—first-of-its variety entry into the itemizing area.

“I believe the IPO modified the narrative within the business on how individuals have a look at co-working,” Ramani, additionally the chairman and managing director of Awfis, mentioned.

Like IndiQube, even Awfis had non-public fairness buyers similar to ChrysCapital and Peak XV Companions (previously Sequoia Capital India & SEA), who ultimately wanted an exit route. The corporate had a considerable supply on the market part throughout its IPO, which meant its early buyers bought a partial exit. Compared, in IndiQube and Smartworks’ IPOs, a bigger quantity of the proceeds went in the direction of capital expenditure on fit-outs and new centres, and paring high-cost debt.

Whereas most of its friends do straight leases from landlords, Awfis follows a managed aggregation mannequin. It companions with the landlords, and so they bear the fit-out prices. Awfis operates the centres and so they cut up the income or revenue.

“Whereas there have been preliminary considerations across the co-working mannequin and its world development narrative, the Indian market dynamics are totally different. The flex mannequin in India, which is a mixture of co-working and managed places of work, with quite a lot of emphasis on enterprise and GCC shoppers, is clearly demonstrating development potential,” mentioned Prateek Jhawar, managing director and head, infrastructure & actual belongings funding banking, Avendus Capital. “Now we have seen how Awfis has carried out within the public market and the way it has rewarded its buyers. With the primary profitable IPO adopted by the current ones, flex is now seen as a separate asset class,” he added.

The following two

However does the Indian market have an urge for food for extra flex IPOs?

“It’s a new-age business, with quite a lot of new gamers, with totally different fashions. So, buyers are taking a look at them in a different way and that turns into a rerating train,” Neetish Sarda, managing director of Smartworks, mentioned throughout a pre-IPO interview with Mint. “The flex area business is rising and there’s substantial depth within the Indian market,” he added.

On the heels of IndiQube’s IPO opening in July, The Government Centre India, a part of Hong Kong-headquartered TEC Group, filed draft papers to lift ₹2,600 crore. The funds might be primarily used for worldwide growth and acquisitions.

The Government Centre was among the many earliest worldwide manufacturers that opened in India—in 2008—at a time when flex working wasn’t actually in style. Right this moment, it gives premium options.

The larger IPO, nevertheless, might be that of WeWork India Administration Ltd, one of many largest operators within the nation and the Indian affiliate of WeWork Inc—the latter holds 22.28% stake in WeWork India.

The corporate obtained market common Sebi’s approval in July. The IPO will comprise the sale of as many as 43.75 million shares, although the corporate hasn’t acknowledged the quantity it goals to lift.

“WeWork India is expected to launch the IPO early September. It could increase round ₹3,500 crore,” mentioned an individual who didn’t want to be named. A WeWork India spokesperson didn’t reply to queries.

The corporate has an operational portfolio of seven.8 million sq. ft, throughout 68 centres in eight cities.

Small to huge

The thrill that the three flex IPOs generated amongst buyers must be checked out from a broader business perspective. What began as a co-working enterprise to handle the wants of startups, small firms, and even people, has undergone remodelling. There’s rising demand for flex workspaces amongst bigger enterprises. Subsequently, main flex operators have leased workplace area from prime builders, in premium enterprise parks.

As an example, a cross-section of firms together with MG Motor India, Quest World, Narayana Well being, SecurityHQ, Allegis Group, and Siemens amongst others have leased area in properties managed by IndiQube. The corporate additionally counts NoBroker, Myntra and Zerodha amongst its huge shoppers.

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Over 85% of IndiQube’s portfolio is occupied by shoppers who’ve taken over 100 seats. Round 44% of the world is occupied by GCCs. For Smartworks, practically 60% of its income is generated from firms which have taken up over 300 seats every.

Until three years in the past, Awfis was primarily a co-working firm catering to the necessities of small enterprises to an important extent. Then, it added managed places of work for enterprises. “I believe our range of areas and consumer community labored nicely for us. The price of provide needs to be the bottom and the return on capital needs to be excessive to succeed,” Ramani mentioned.

Development narrative

Flex operators, in the meantime, have huge development ambitions.

Awfis plans so as to add 40,000 seats in 2025-26; Smartworks has 11.92 million sq. ft in its portfolio as on 30 June, of which 8.3 million sq. ft is operational. It plans to scale up additional.

“The expansion might be extra democratic from right here on, and one has to go to tier II markets. Now we have been rising at 30-35% yearly, and that may proceed,” IndiQube’s Rishi Das mentioned.

As per property advisory JLL India, India has seen remarkable growth of operational versatile area inventory, which has now reached a considerable 79.1 million sq. ft throughout the highest seven cities—Bengaluru, Chennai, Delhi-Nationwide Capital Area, Hyderabad, Kolkata, Mumbai and Pune.

The operational flex inventory is anticipated to almost double over the subsequent 4 to 5 years, and attain 135 million sq. ft by 2028, reshaping the nation’s evolving workplace panorama.

As per property advisory JLL India, India has seen outstanding development of operational versatile area inventory, which has now reached a considerable 79.1 million sq ft throughout the highest seven cities.

“2025 has began strongly for flex operators. Within the final one yr, operators have acquired area in lots of Grade A (essentially the most premium high quality in actual property) buildings to strengthen provide. The IPO route will assist these firms entry capital and develop sooner,” mentioned Karan Singh Sodi, a senior managing director at JLL India.

In the meantime, Awfis needs to construct ancillary companies, going ahead, transferring from simply being a flex participant to turning into a “business options platform”. This might imply constructing meals and beverage, or transport and mobility options for different firms.

“We’ll proceed to steer the worth bandwagon, even after we supply premium merchandise like ‘Elite’ or ‘Awfis Gold’. It’s very troublesome to ship worth; it’s a bit simpler to spend extra money when it comes to companies, design, and worth the product extra,” mentioned Sumit Lakhani, chief government officer (CEO) of Awfis.

An everyday seat on the firm prices ₹8,000 a month. Gold is priced at ₹10,000 per seat whereas Elite is even pricer— ₹12,000 a seat.

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Elephant within the room

In July, IT bellwether Tata Consultancy Companies mentioned that it’s shedding 12,000 workers, and whereas the trigger was attributed to a talent mismatch amongst different issues, business observers signalled synthetic intelligence (AI) to be a attainable purpose behind the sacking. Tech firms are transferring in the direction of leaner, AI-savvy groups.

That is additionally ominous information for actual property, and by extension, flex workspace suppliers.

IT companies firms, even a number of years in the past, employed truckloads of freshers from engineering faculties throughout the nation and so they all wanted seats in fancy Grade A buildings. If AI impacts IT jobs in an enormous manner, going forward, the fallout on the business workplace sector could be inevitable.

IndiQube’s Das mentioned one has to attend and see how the scenario plays out. “It’s just like the elephant within the room. Nevertheless, amid the uncertainty, if massive firms resolve to outsource workplace area as an alternative of proudly owning costly actual property, flex workspaces could be their first port of name,” he hoped.

Analysts have additionally raised one other concern—profitability. With the business workplace market at an all-time excessive, and flex operators scaling up, acquisition prices, which incorporates the price of leasing and match outs amongst different bills—have additionally risen.

Moreover, there’s growing competitors as firms compete to swoop up good high quality actual property and tenants. “Whereas there’s competitors, development isn’t a problem. Overspending on fixtures (match outs) by the operators might be a priority,” Avendus Capital’s Jhawar mentioned.

In 2024-25, solely Awfis was worthwhile for the complete yr. WeWork India is but to file full yr financials however within the first half of the yr, it reported a web revenue of ₹175 crore. Smartworks and IndiQube proceed to make losses.

The reported losses are primarily attributable to non-cash accounting changes underneath Ind AS 116, an accounting technique, which front-loads bills by means of depreciation and finance prices, spokespersons of Smartworks and IndiQube acknowledged.

All the highest operators, nevertheless, are producing sturdy money flows at an operational degree, and have raised institutional cash earlier than their IPOs, which drove growth.

“This isn’t a typical money burn mannequin. Nevertheless, whereas the mature centres flip worthwhile on the operational degree, the newer centres will take time to interrupt even,” an analyst at a Mumbai brokerage, who didn’t need to be recognized, mentioned. “As extra centres mature, profitability, at the very least for the highest, credible gamers shouldn’t be a priority,” the analyst added.

For buyers, these are encouraging phrases.